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Message: The Kraken Devouring China
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Dan Norcini says that demand for gold and silver in China is high because of negative real interest rates.
I am flabbergasted. Are real interest rates in the US and Europe positive? We have been living with negative real interest rates in the US and Europe for a number of years now and nobody says a word about it. Purchasing Power? Who cares in the west. There is a continuous transfer of wealth from the pensioners and savers to the rest of the economy and it is simply ignored in the macro-economic policy considerations. Core inflation bogus and deflation scare is the excuse.
DCFM (I am not a saver nor a pensioner)
The Kraken Devouring China
I keep bringing this up even at the risk of beating a dead horse because I believe that the inflation monster is rampaging through many Asian countries, particularly China, at a pace which is putting a severe amount of stress on government policy makers not to mention consumers
This is the reason that Asian demand for gold and silver is so robust and also the reason I believe that all dips in price for the metals will be eagerly bought.
Factoring in the current inflation rate of China, savers there are experiencing negative REAL rates of return. Gold and silver therefore are like a lifeline to those citizens who are attempting to preserve their buying power.
It could well be that part of the "strategy" behind the Fed's Quantitative Easing Policy is to put so much pressure on the Chinese that they have no choice but to let the Yuan rise to a more natural equilibrium level to defeat the Kraken.
Here's the kicker however, if any upward revaluation in the Yuan were to serve to correct somewhat the huge imbalance in US/China trade by lowering US imports of Chinese goods, the effect would be that China would need to BUY LESS US Treasuries to sterilize that trade surplus of theirs. To whom then is the Fed going to sell all those Treasuries that keep accumulating on its balance sheet?
You can read the story detailing the seriousness of the inflation problem in China at the link here:
http://www.bloomberg.com/news/2011-03-06/inflation-endangering-chinese-dream-spurs-wen-pledge-to-rein-in-prices.html
This is the reason that Asian demand for gold and silver is so robust and also the reason I believe that all dips in price for the metals will be eagerly bought.
Factoring in the current inflation rate of China, savers there are experiencing negative REAL rates of return. Gold and silver therefore are like a lifeline to those citizens who are attempting to preserve their buying power.
It could well be that part of the "strategy" behind the Fed's Quantitative Easing Policy is to put so much pressure on the Chinese that they have no choice but to let the Yuan rise to a more natural equilibrium level to defeat the Kraken.
Here's the kicker however, if any upward revaluation in the Yuan were to serve to correct somewhat the huge imbalance in US/China trade by lowering US imports of Chinese goods, the effect would be that China would need to BUY LESS US Treasuries to sterilize that trade surplus of theirs. To whom then is the Fed going to sell all those Treasuries that keep accumulating on its balance sheet?
You can read the story detailing the seriousness of the inflation problem in China at the link here:
http://www.bloomberg.com/news/2011-03-06/inflation-endangering-chinese-dream-spurs-wen-pledge-to-rein-in-prices.html
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